Where you bank matters. It affects things like the amount of interest you can earn on your savings or how much it’ll cost to get a loan. It also impacts the convenience, accessibility, and overall experience of managing your money.

Community banks are a local and more personal alternative to larger banks. They’re often smaller and exist to serve a specific community. But community banks come with downsides, too; they may offer fewer products and services an have limited branch locations.

Continue reading to learn more about community banks and to find out if this type of bank is right for you.

What is a community bank?

Generally speaking, a community bank (also known as a local bank or regional bank) is a smaller bank that serves a specific community or geographic area. Although there’s no official definition for a community bank, the FDIC defines community banking organizations as those with $10 billion or less in assets.

But purpose, rather than asset size, might be a better way to describe a community bank. Most community banks prioritize personal relationships with their customers. Because these banks often employ members of the community they serve, they’re better suited to forming personal banking relationships with members.

These relationships can pay off financially, too: At community banks, a customer’s personal situation and relationship with the bank may hold more weight than their credit score when it comes to qualifying for a loan, for example.

Community bank products and services

Community banks may have fewer products and services than big national banks, but they may have everything you need.

Community banks typically offer both personal and small business banking and provide the following:

• Checking accounts and debit cards

• Savings accounts, certificates of deposit (CDs), and money market accounts

• Mortgages

• Loans

Some community banks also offer additional products and services such as credit cards, wealth management, and estate planning services. Others have more limited services.

Community banks vs. national banks

Community banks and national banks offer similar products and services, but they have a few major differences.

National banks in the U.S. are commercial banks that can be publicly traded. National banks are chartered at the federal rather than state level and are regulated by the Office of the Comptroller of the Currency.

National banks tend to be larger than community banks and have a more widespread branch network. They also tend to offer more products and services and have an advanced digital banking platform.

However, national banks may lack the personal relationships that community banks offer. National banks serve customers all over the country and have to follow stricter standards when approving loan applications. Community banks can be more lenient.

And while community banks work to engage with and support their local communities through charity and volunteer work, national banks don’t often have those same local connections.

To recap, below are some of the biggest differences between community and national banks:

Pros and cons of community banks

Community banks have a lot to offer, but they have some disadvantages, too. Consider these pros and cons of community banks:

Pros

• Personal relationships: Community banks emphasize personal relationships and customer experience. According to a survey by J.D. Power, local banks score higher than national banks in overall customer satisfaction; community banks scored 825 out of 1,000 vs. 797 for large banks.

• Flexible lending requirements: Community banks don’t have to rely as closely on impersonal metrics when making loan decisions — instead, they can be more lenient and consider customers' personal circumstances.

• Community support: Community banks employ and serve local individuals, so they’re well-equipped to support their communities. They may also give back through charities and volunteer work and engage with their communities in other ways.

• Favorable rates and fees: To compete with bigger banks, community banks may offer fewer fees, higher savings interest rates, loan discounts, promotional offers, and other relationship banking perks.

Cons

• Limited branch networks: Community banks often serve a specific location. While their online banking services may be available to a wider customer base, community bank branch networks are typically smaller than those of national banks.

• Fewer product and service offerings: Community banks generally have fewer products and services than bigger banks. So they may not have everything you need to meet all your banking, lending, investing, and financial planning needs in one place.

• Clunkier tech: Digital banking is improving across the board, but you may find the best online platforms and mobile apps at bigger banks. While it varies from bank to bank, community banks may not offer the best digital banking experience.

Should you bank with a community bank?

A community bank could be a good choice if you’re looking for a more personal, high-touch banking experience. You may also like this option if you want to support your local community, neighbors, and business owners. And if you live in a rural area without any convenient national bank branches nearby, it may be the only option for in-person banking.

On the other hand, a community bank may not be best for someone who wants all of their financial products and services under one roof. Those who move often — especially across state lines — may also have better luck with a national bank that can serve them well from anywhere. And if you’re looking for the most seamless digital experience, you’re more likely to find it with a national bank.